As an entrepreneur, you get excited about opportunities now. But the value of your business is determined by choices that show their effect only in the future.
In practice, we see entrepreneurs start working on enterprise value late because of this. We see this especially as soon as a sale comes into the picture: the moment turns out to come sooner than expected, and in hindsight you would have preferred to make decisions differently. That's why we say: you can't start early enough.
Double EBITDA
The question"What is my business worth?" is of interest to every business owner. But this is not the most important question. The real question is, "Where is the value in my business, and how do I make that value visible in the future? Because a valuation looks ahead. The DCF method, commonly used for business valuations, bases value on expected future cash flows. So you're not steering on your history, but on what your business can deliver tomorrow. That requires direction, focus and discipline.
In our practice, we guide entrepreneurs who want to optimize their business value and really work at it. And with results: businesses that invest seriously in the right valuedrivers often see their performance improve significantly within a year. And in the case of a sale, it is even more important to mitigate risks in advance, remedy deal breakers and take advantage of opportunities.
We've guided entrepreneurs with value management who managed to double their EBITDA in a year. And that was no fluke, but the result of focused work on what really drives the business. It not only results in better numbers, but also a business that is more attractive to employees, customers and, when the time comes, buyers. In addition, it ensures a higher deal certainty when the sales process is actually started.
Critical buyers
We are increasingly noticing that buyers are becoming more critical when purchasing a target. For example, during the due diligence/book review process. Timely and thorough sales preparation ensures that potential deal breakers, price reducers and other obstacles to the process are mitigated in advance. This ensures a smoother (sales) process with a better end result.
A strategy focused on future cash flows is what would benefit any business. It forces you to look at the long term and make choices that strengthen the future of the business. It gives insight into which knobs to turn to achieve value growth. And it helps entrepreneurs focus their energy on the parts that actually make a difference.
More valuable
Our most important advice: don't wait until you have sales plans. Work now to build a business that is stronger, more valuable and more future-proof. Because if you only start optimizing once the seed for selling has been planted, it's hard to arrive at the best deal on all fronts.
If you are an entrepreneur wondering what your business is worth, you should especially want to know where the value may be. Because that is where the strategic choices lie that will determine how your business develops in the coming years. And ultimately: which future you yourself want to create as an entrepreneur.
